CLA-2 RR:TC:SM 560726 MLR

Mr. Jerry Armani
Mamiye Sales, Inc.
112 West 34th Street
Suite 1000
New York, NY 10120

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to children's wearing apparel; embroidered patches; Special Access Program

Dear Mr. Armani:

This is in response to your letter of October 28, 1997, requesting a ruling regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to children's wearing apparel from the Dominican Republic to which embroidered patches from China are assembled. In a telephone conversation with a member of my staff on December 12, 1997, you confirmed that you are requesting a ruling regarding the applicability of the Special Access Program. Sample patches and children's shorts were submitted with your request.

FACTS:

It is stated that 100 percent polyester thread, non-woven non-knit 100 percent acrylic patch material, and non-woven non-knit 100 percent polyester interfacing material for the back, all of Chinese origin, will be assembled together in China to form a patch. Two samples of a patch depicting a bear ("Pooh") character have been submitted with the ruling request. It is stated that these patches will be imported into the U.S. and together with U.S.-origin (i.e. knit) cut-to-shape fabric components, thread, and labels will be exported to the Dominican Republic, where they will be assembled together into children's wearing apparel. A sample of children's shorts were submitted with the ruling request.

ISSUE:

Whether the children's wearing apparel to which the subject patches will be assembled in the Dominican Republic will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

To qualify for the Special Access Program, products must be eligible for entry under subheading 9802.00.80, HTSUS. The requirements for participating in the Special Access Program provide that all fabric components, with the exception of findings, trimmings and certain elastic strips not exceeding 25 percent of the cost of the components of the assembled product, must be formed in the U.S. Such U.S. formed fabric must also be cut to pattern or shape in the U.S. Customs Directive Number 3500-12 dated September 2, 1986 provides as follows:

[f]indings trimmings, and elastic components of the finished assembled products need not be of United States origin. Products assembled in participating Caribbean countries and made of U.S. formed and cut fabric plus findings, trimmings, and elastic of foreign origin may enter the United States under the program. However, the total value of such foreign findings, trimmings, and elastic components shall not exceed 25 percent of the cost of the components of the assembled product. Products whose foreign findings, etc., exceed 25 percent do not qualify for the Program. Examples of findings and trimmings are sewing thread, hooks and eyes, snaps, buttons, "bow buds", lace trim, zippers, including zipper tapes, and labels.

The initial question which must be addressed is whether the imported children's wearing apparel is eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations {19 CFR 10.14(a)}, states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations {19 CFR 10.16(a)}, provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

While the operations to be performed in the Dominican Republic in making the children's wearing apparel are not described, we assume for purposes of this ruling that the sewing and all other operations associated therewith are acceptable assembly operations or operations incidental to assembly. The next question which must be addressed is whether the Chinese-origin patch depicting the "Pooh" character assembled to the apparel is considered a "finding or trimming" as that term is used for purposes of the policy directives issued in connection with the Special Access Program.

In Headquarters Ruling Letter (HRL) 560520 dated September 22, 1997, Customs considered the eligibility of jeans for entry under subheading 9802.00.90, HTSUS, to which a patch label of Hong Kong origin with the words "TOMMY HILFIGER" were sewn. The patch label was less than .5% by weight of the finished article. It was found that since the patch label was placed onto the garment to indicate the brand name of the product and even though it added some ornamentation to the jeans, it was not an essential part of the structure of the jeans. Additionally, since the patch label was a relatively small portion of the completed garments and accounted for less than .5% of the weight of the finished article, it was held that the patch label was a finding or trimming for purposes of subheading 9802.00.90, HTSUS.

In this case, the children's shorts depict a label, stated to be of U.S. origin, with the words "Pooh & Tigger", and the Chinese-origin patch at issue depicts the "Pooh" character. Accordingly, as was the case in HRL 560520, the patch symbolizes a brand and adds ornamentation to the shorts. While Customs in HRL 560520 found that the patch was considered a finding or trimming for purposes of 9802.00.90, HTSUS, we are of the opinion that this determination is relevant in this case as 9802.00.90 considers the policy directives under the former Special Regime Program which are similar to the policy considerations of the Special Access Program. Therefore, we find that provided the fabric components of the children's wearing apparel will be both formed and cut in the U.S., such apparel will qualify for the Special Access Program provided any findings, trimmings, and certain elastic strips do not exceed 25 percent of the cost of the components of the assembled apparel. HOLDING:

On the basis of the information and samples submitted, the children's wearing apparel will qualify for the partial duty exemption under the Special Access Program when returned to the U.S. from the Dominican Republic, provided all of the fabric components, with the exception of the findings, trimmings, and certain elastic strips not exceeding 25 percent of the cost of the components of the assembled apparel, are formed and cut to shape or pattern in the U.S.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,


John Durant, Director
Commercial Rulings Division